Cannabis Sector - Boom - Bust - BOOM The cannabis stocks a few years ago had the media buzzing, the hype and excitement of the once illegal substance now becoming accessible in Canada brought in many many investors. The stocks were roaring but the companies were far from profitable. Skip ahead a couple of years and the bigger players with better partners and investors (underwriters) were still alive and starting to edge their way to profitability. Some have crossed the line to making money while others are on the edge of turning profitable. As each producer turns the corner and starts bringing in enough money to cover their expenses investors will feel more comfortable picking up the shares and holding them longer. It is also reasonable to expect that larger institutions such as banks and ETFs will take in more and more shares for the benefit of their Clients for the longer term returns.
After "The Bubble Burst" on the sector the media changed from singing songs of glory and riches to one of misery and despair. Investors were no longer motivated to invest, or even hold, many lost all hope and took their losses and walked away. This trend was a golden opportunity to margin players and they certainly did not miss the opportunity to trade against the stocks and, as well, help the negative sentiment through negative “news” articles published through widely distributed “news letters” that will publish just about anything when paid to do so. These articles sometimes had disclaimers neatly hidden on the bottom that many readers would never read, however they were there.
Timing the market often does not work well for many and timing could not be worse for some companies approaching profitability when 2020 hit and the Corona Virus shook the markets, not just Cannabis stocks but the entire global market. There was virtually no sector spared in the sell off. What may have looked like the final blow for some companies turned out to be a mini-boom for Cannabis producers. Despite share prices falling and remaining low throughout 2020 many of the bigger cannabis producers were actually pulling in record sales figures with some companies literally running out of product and having to source additional cannabis from other producers.
Novice investors would ask “Why”, how can the share price remain low while the companies were reporting a jump in sales? Simply put “The Market Sets the Price”. While C-19 and health concerns were at the forefront of investors’ minds their backs were turned on the potential building in the Cannabis Sector. The C-19 certainly caused issues for every business during 2020 however it did not stop these companies from doing business nor did it stop these companies from “Making Money”. Demand for the products increased due to people staying home, the management of stress but also because many of the producers also rolled out new products and new ways to ingest cannabis beyond the traditional “rolling of a joint”
Those who understood the reasoning behind the weakness in shareprice of promising Cannabis producers such as HEXO and took up positions in 2020 will likely reap huge benefits in the coming months and years as the company turns the corner of profitability and new products, partnerships and markets develop for HEXO. Those who took bet against these producers during a overall downturn in not only the Cannabis Sector but a global downturn across all markets will find it very difficult to recover from such a decision.
While the though of making large returns from investing can be very exciting traders are cautioned to do their own research, set limits and timelines for each investment as well as to determine some sort of an investment strategy before entering the markets.
** Original Content by StockHouse User Quinlash. Not for duplication or distribution.